Citibank forecasts Ethereum's year-end target price at $4,300, though L2 value capture remains shrouded in uncertainty.

On September 15, Citibank released its latest research report setting a year-end target price of $4,300 for Ethereum (ETH), below current spot prices.

The report employs the same predictive model previously used for Bitcoin, comprehensively considering three major factors: fundamental value, capital inflow potential, and macroeconomic environment. The report also provides prediction ranges of $6,400 in a bull market scenario and $2,200 in a bear market scenario:

**Fundamental Value**: Citibank's model indicates that current Ethereum prices have exceeded levels supportable by its network activity, possibly driven by recent ETF capital inflows and market overexcitement about use cases such as tokenization, creating short-term overvaluation risks.

**Capital Inflow Potential**: Although capital flowing into Ethereum ETFs has twice the price-driving effect of Bitcoin ($1 billion inflow can push prices up 6%), Citibank expects overall volumes to be far smaller than Bitcoin, with new investors still preferring Bitcoin as their first choice.

**Macroeconomic Environment**: Citibank notes that in current predictions, macroeconomic factors have minimal impact on Ethereum. However, should an economic recession occur, macro factors will become the key force driving Ethereum lower.

**Value Anchor and L2 Challenges: 30% Value Transmission Rate is Key Assumption**

Citibank believes that unlike Bitcoin's "digital gold" positioning, Ethereum's value is more closely tied to its network activity (usage as a smart contract platform).

However, the report pointedly notes that recent activity growth in the Ethereum ecosystem has mainly occurred on Layer 2 (L2) networks built on top of the Ethereum network, and L2 prosperity has not directly and completely translated into Ethereum's value.

Due to transaction cost and throughput limitations, applications and users have migrated to L2, but the market remains skeptical about how much value L2 can bring back to the Ethereum mainnet. Last year's Dencun upgrade on the Ethereum network, while reducing fees paid by L2 to the mainnet and promoting L2 adoption, has also intensified market concerns about Ethereum's value capture capabilities.

Citibank's model assumes a 30% value transmission rate from L2 activity to the Ethereum mainnet. Even under this assumption, current Ethereum prices still exceed valuations derived from combined L1 and L2 activities.

Citibank attributes this premium to recent market buying pressure and "boom expectations" for future use cases such as tokenization and stablecoins.

**Stronger but Smaller ETF Capital Flows: Significant Leverage Effect but Total Volume Hard to Match Bitcoin**

Capital flows are another key factor affecting Ethereum prices.

The report observes that substantial purchases by digital asset treasury companies and ETF capital inflows have been important drivers of Ethereum's recent outperformance.

Citibank emphasizes Ethereum's extremely strong capital flow leverage effect. Weekly ETF capital inflows of $1 billion can drive Ethereum prices up approximately 6%, while the same amount of capital affects Bitcoin prices by only 3%.

However, Citibank expects capital inflows to Ethereum to be smaller than Bitcoin. The logic is that Ethereum's approximately 25% market cap ratio relative to Bitcoin may be the upper limit for short-term new capital allocation, as new investors tend to start allocating from the most well-known Bitcoin.

**Limited Impact of Macro Factors in Bull Market Scenarios**

Macroeconomic environment, particularly stocks and the US dollar, are traditional forces affecting cryptocurrency prices.

Similar to Bitcoin, Ethereum's price shows positive correlation with stock markets and negative correlation with the US dollar.

However, in Citibank's baseline scenario, macro factors are not decisive forces. The report notes that although Citibank's US equity team predicts modest upside for stocks by year-end with an S&P 500 target of 6,600 points, based on Ethereum's historical beta coefficient, this only contributes a weak 35 basis points of upward drive to its price prediction.

But investors must note that in bear market scenarios, macro factors will be crucial. The report emphasizes that the bear market target price of $2,200 will be primarily driven by macro factors triggered by economic recession, particularly significant stock market declines.

**Citibank Predicts $4,300 Year-End Target Price**

Citibank ultimately constructed its price prediction model by integrating the three core factors mentioned above—network activity, capital flows, and macro environment:

**Baseline Scenario ($4,300)**: Assumes moderate capital inflows by year-end, with market excitement about Ethereum network use cases maintained, supporting prices slightly below current levels.

**Bull Scenario ($6,400)**: Premised on significant increases in network activity (possibly driven by stablecoin or tokenization application explosions), alongside continued strong demand from ETFs and treasury companies.

**Bear Scenario ($2,200)**: Primarily dominated by recessionary macro factors, particularly stock market declines, leading to market sentiment reversal and prices falling back to levels supported only by current network activity.

In conclusion, Citibank's report provides investors with a clear analytical framework. It affirms Ethereum's value as an application platform while candidly pointing out its core shortcomings in L2 value capture.

In the short term, prices face risks of being pushed higher by market sentiment. In the long term, whether Ethereum can fulfill its promise as a "world computer" depends critically on its ability to effectively capture the value of L2 ecosystem prosperity.